Broker Note Briefing: Tuesday

Investors were in wait-and-see mode Tuesday, taking a step back following recent gains, as they await the Jackson Hole economic symposium at the end of the week.

We’ve had a rummage through the day’s big broker notes to provide you with a selection of our top picks.

J.P. Morgan Chase reviewed its global equity strategy. It upgraded cyclicals to neutral from underweight, while reducing pharmaceuticals to underweight from neutral. “Our concerns over growth and earnings remain, but we recognize that cyclicals have underperformed by 10% since March and that [purchasing managers' indexes] are showing some stabilization,” said the brokerage. J.P. Morgan decided against an outright move to overweight due to “no valuation cheapness, unrealistic [earnings-per-share] forecasts and no sign of stabilization in Chinese equities nor Chinese growth.” Within cyclicals, it remains underweight on China plays such as mining, steel and capital goods in particular. Pharmaceuticals was the best-performing sector over the past six months, said J.P. Morgan. Regionally, the brokerage continues to expect that relative performance of Europe versus the US will improve.

Meanwhile, Goldman Sachs raised Crédit Agricole to buy from neutral, noting the company has received several bids for its Greek unit Emporiki from local banks. Goldman expects Crédit Agricole to benefit from the sale. “It would be unlikely that the loss on a sale would be sufficient to trigger the need for a rights issue,” Goldman Sachs said, adding that after the sale, Crédit Agricole won’t have to book more Greek losses.

Finally, UBS downgraded GlaxoSmithKline to neutral from buy, noting that since Jan. 1, 2011, the stock has outperformed London’s FTSE 100 Index by 25% and AstraZeneca by 14%. “Given Glaxo’s valuation, and somewhat reduced earnings visibility for the stock, we see less scope for performance versus peers,” said UBS.

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